Radio-Canada

(October 26, 2004) If Canada’s financial advisors were growing accustomed to abuse in the national print media, they are today facing public scrutiny in perhaps the most influential media source of all: national television.

While New York State Attorney General Eliot Spitzer investigates contingency commissions in the U.S. insurance industry, a report on the French edition of Radio-Canada’s The National is adding fuel to the fire.

According to the Radio-Canada investigative report aired on Monday night in Quebec, Services Financiers Laurentienne (SFL) uses a “carrot and stick” approach with its in-house products, offering incentives such as trips and enhanced commissions to those who meet targets, and dismissal for those who do not.

SFL and its English counterpart Laurentian Financial Services are distributors for Desjardins Financial Security, which specializes in life and health insurance and savings products.

The report centers on one advisor, Léon Lemoine, who says he was handed his walking papers for failing to meet sales targets for in-house products. After about six months as an independent, Lemoine apparently contacted the CBC.

In the televised report, Lemoine said he became suspicious when every request for an insurance quote came back with a recommendation for the Desjardins product. When he challenged the recommendation, he was told he could buy his own analytical software and check for himself. He did.

He says he found that on every case he ran through the software, the Desjardins product ranked very low on the list of recommendations. With his own analytic capability, he began selecting insurance on his own, rarely selling Desjardins.

Lemoine says that it was this decision that led to his dismissal, as the Desjardins head office demanded his termination for failure to sell the in-house product.

When asked to explain the practice, Desjardins Group president Alban D’Amours said there may be some clients who do not know about the use of incentives, but were satisfied with their results all the same.

D’Amours also told Radio-Canada that such practices were common throughout the industry, despite the appearance of conflict of interest inherent in such arrangements.

CBC Radio-Canada also took the topic to the airwaves on Tuesday, with the afternoon call-in show Maisonneuve en direct asking callers who they thought their advisors were looking out for: their client, their firms or themselves.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com